Kingfish leaves Michael Hill to focus on a2, F&P Healthcare and Mainfreight

AUCKLAND: Kingfish pivoted out of Michael Hill International in the latest quarter, adding to its position in a2 Milk, Fisher & Paykel Healthcare and Mainfreight after strong returns.

‘‘During the March quarter portfolio heavyweights like the a2 Milk Company, Fisher & Paykel Healthcare and Mainfreight delivered significantly higher returns than the market,’’ senior portfolio manager Sam Dickie said.

A2 Milk was up 28% while Fisher & Paykel Healthcare gained 21%, he said.

Mainfreight gained 16% in the quarter according to data from Refinitiv.

Kingfish had its best quarter in 13 years and its adjusted net asset value for the three months was 13.9% while the S&P/ NZX50G Index returned 11.7% for the quarter, Mr Dickie said.

He noted that in recent months a2’s share price had been battered by various fears related to regulatory changes in China, news the chief executive had sold a parcel of shares as well as slowing consumption in China.

Finally, a sales ‘‘miss’’ relative to consensus ‘‘led many to think the growth story was over.’’

However, ‘‘we have added to our a2 position in several of those situations, which have all proved to be transitory and reflect the market’s shortterm focus.’’

Of its total portfolio, 13.2% is now invested in a2, up from 11.5% on December 31.

Regarding Fisher & Paykel Healthcare, he said Kingfish continued to focus on the five to 20year outlook as well as the ‘‘very large and untapped opportunities Fisher & Paykel Healthcare has with Optiflow outside the intensive care unit.’’

Optiflow is a nasal highflow therapy that is used for respiratory support. The stock now accounts for 13.9% of the portfolio versus 13.4% on December 31.

Kingfish also lifted its investment in Mainfreight to 10.6% from 10.4%.

In the other direction, Mr Dickie said the fund had exited its longstanding holding in Michael Hill, noting the investment case has ‘‘changed meaningfully.’’

Kingfish had 2.5% of its portfolio invested in Michael Hill as of December 31.

According to Mr Dickie, the company requires ‘‘near flawless execution’’ to navigate the backdrop of a structural shift to online sales. Underlying growth in the fine jewellery category is also ‘‘flat at best.’’

‘‘During these turbulent times, it became clear to us that the strength of the business and the moat around the business is not what it once was.

‘‘The recent share price recovery on the back of the new CEO’s turnaround plan presented an attractive time to exit the position,’’ he said.

Kingfish shares last traded at $1.42 and are up 6.8% over the past 12 months. —BusinessDesk